Circa summer 2007, when the market music was still blaring and Wall Street block partiers were still dancing, we were coming off a period where virtually everything had taken flight; stocks, gold, agricultural commodities, even art. Recently we’ve been in a similar situation. Gold has been hopping, oil has been hopping, stocks have been hopping, and long term bonds, which should be getting kneecapped by the rise of commonly perceived inflation indicators like gold, still haven’t buckled. These trends have left some commentators sounding bewildered.
I might have a partial explanation: the same phenomenon we now use to explain what we experienced just two years ago; liquidity. The world’s central banks have been printing money like silent movie villains in a push to reliquify everything. Now it looks like we’re seeing the effects. And like we observed just two years ago, in the short run, the “fundamentals” don’t much matter. The motive for the globewide quantitative easing was reflation, and now that we’ve beheld reflation, the commentators who inked it into the vernacular are looking every which way for the “fundamentals” to justify these reflated gains.
I mentioned art earlier. Recently, a Warhol silkscreen went for over 43 million. Could this be a sign of a reflation top? Who knows? The fact that any art could sell for 43 million is remarkable. The fact that anyone would value Warhol’s non-art above 99 cents certainly seems a symptom of extraordinary popular delusions and the madness of crowds.
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Liquid Launch
Circa summer 2007, when the market music was still blaring and Wall Street block partiers were still dancing, we were coming off a period where virtually everything had taken flight; stocks, … [Read More]
Posted by Mike Payne on November 22, 2009
The Usual Suspects